Bank Regulation, Capital And Credit Supply: Measuring The Impact Of Prudential Standards

The existence of a "Bank capital channel", where shocks to a bank's capital affect the level and composition of its assets, implies that changes in bank capital regulation have implications for macroeconomic outcomes, since profit-maximising banks may respond by altering credit supply or making other changes to their asset mix. The existence of such a channel requires that banks do not have excess capital with which to insulate credit supply from regulatory changes, raising capital is costly for banks, and firms and consumers in the economy are to some extent dependent on banks for credit.

Provided by: Financial Services Authority Topic: Software Date Added: Sep 2009 Format: PDF

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